Exam 3: The Accounting Cycle: Capturing Economic Events

Montauk Oil Co. reports these account balances at December 31, 2010 Accounts Payable \ 110,000 Land \ 200,000 Notes Payable \ 260,000 Equipment \ 160,000 Cash \ 80,000 Accounts Receivable \ 100,000 Buildings \ 240,000 Share Capital \ 340,000 Retained Earnings \ 70,000 On January 2, 2011, Montauk Oil collected $50,000 of its accounts receivable and paid $20,000 of its accounts payable. -Refer to the above data. In a trial balance prepared at January 3, 2011, the total of the debit column is:

The following transactions occurred during March, the first month of operations for Quality Galleries Limited: * Share Capital was issued in exchange for $360,000 cash. * Purchased $180,000 of equipment by making a $60,000 cash down payment and signing a note payable for the balance. * Made a $35,000 cash payment on the note payable from the purchase of equipment. * Sold a piece of equipment for cash of $18,000. The equipment was sold at cost, so there is no gain or loss on the sale. -Refer to the above data. What are total assets of Quality Galleries at the end of March?

Ceramic Products Limited reports these account balances at January 1, 2009 (shown in alphabetical order): Accounts Payable \ 28,000 Accounts Receivable \ 20,000 Buildings \ 153,000 Share Capital \ 185,000 Cash \ 13,000 Equipment \ 20,000 Land \ 80,000 Notes Payable \ 24,000 Retained Earnings \ 49,000 On January 5, Ceramic Products collected $12,000 of its accounts receivable and paid $11,000 on its note payable. -Refer to the above data. In a trial balance prepared on January 5, 2009, the total of the credit column is:

Sue Costa, owner of A-1 Cleaning Services, invested an additional $75,000 in the company. Which of the following would be a part of the correct journal entry to record this transaction?

The purchase of equipment on credit is recorded by a:

Effects of a series of transactions on balance sheet items Fieldstone Limited had the following transactions during the month of March, the first month of operations for the business: * The corporation issued 12,000 shares of share capital to Sandy Fieldstone in exchange for $120,000 cash. * Purchased $73,000 of equipment; made a $18,000 down payment and signed a note payable for the balance. * Made payment of $9,000 on the amount owed for equipment (A.) Compute the balance in the Cash account at the end of March. (B.) What are the total assets of Fieldstone Limited at the end of March? (C.) Compute the balance in the Notes Payable account at the end of March. (D.) What is the total amount of equity at the end of March?

Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.

At the end of October, Flagship Marina received a bill for fuel used in October. Payment is not due until November 30. This transaction:

The reason that revenue is recorded by a credit entry to a revenue account is:

The journal entry to record a particular business transaction includes a credit to the Cash account. This transaction is most likely also to include:

The accrual basis of accounting recognizes expenses only when they are paid.

The following transactions occurred during March, the first month of operations for Quality Galleries Limited: * Share Capital was issued in exchange for $360,000 cash. * Purchased $180,000 of equipment by making a $60,000 cash down payment and signing a note payable for the balance. * Made a $35,000 cash payment on the note payable from the purchase of equipment. * Sold a piece of equipment for cash of $18,000. The equipment was sold at cost, so there is no gain or loss on the sale. -Refer to the above data. What is the balance in the Cash account at the end of March?

The principle that states revenue should be recognized at the time goods are sold or services rendered is called:

Which statement is true about credits?

The agreement of the debit and credit totals of the trial balance gives assurance that

Land is purchased by making a cash down payment of $40,000 and signing a note payable for the balance of $130,000. The journal entry to record this transaction in the accounting records of the purchaser includes:

Which statement is true about debits?

A credit to a ledger account refers to the entry of an amount on the right side of an account.

Recording transactions in T accounts; trial balance On May 15, George Manny began a new business, called Sounds Limited, a recording studio to be rented out to artists on an hourly or daily basis. The following six transactions were completed by the business during May: (A.) Issued to Manny 5,000 shares of share capital in exchange for his investment of $200,000 cash. (B.) Purchased land and a building for $410,000, paying $100,000 cash and signing a note payable for the balance. The land was considered to be worth $310,000 and the building $100,000. (C.) Installed special insulation and soundproofing throughout most of the building at a cost of $120,000. Paid $32,000 cash and agreed to pay the balance in 60 days. Manny considers these items to be additional costs of the building. (D.) Purchased office furnishings costing $18,000 and recording equipment costing $88,400 from Music Supplies. Sounds paid $28,000 cash with the balance due in 30 days. (E.) Borrowed $180,000 from a bank by signing a note payable. (F.) Paid the full amount of the liability to Music Supplies arising from the purchases in D above. Instructions (A.) Record the above transactions directly in the T accounts below. Identify each entry in a T account with the letter shown for the transaction. This exercise does not call for the use of a journal. (B.) Prepare a trial balance at May 31 by completing the form provided.

Davis Limited, a music group, entertained at a black-tie dinner dance on April 26, and collected the fee in full at the end of the evening. This transaction: